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TMI Blog2013 (5) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... being provision of warranty expenses without appreciating the facts mentioned by the Assessing Officer that the expenses were mere estimations and had not matured and it was a contingent liability rather than a ascertained liability. 3. Hence order of the Ld. Commissioner of Income Tax (A) may be set aside and the order of the Assessing Officer be restored. 3. Apropos ground no. 1 :- Transfer Pricing Issue :- 3.1 LG Electronics India Pvt. Ltd. (LGEIL) is a 100% subsidiary of LG Electronics Korea (LGEK). Its major international transactions undertaken by the assessee are as under:- S.No. International Transaction Method Value (in Rs.) 1. Import of raw material and components TNMM 55,45,42,940 2 Import of service spares TNMM 4,79,80,282 3 Export of raw materials and components Cost Plus 22,49,801 4 Import of finished goods TPM/TNMM 1,96,01,67,598 5 Export of manufactured goods CUP 31,11,29,843 6 Import of production equipment Cost Plus 53,67,67,978 7 Royalty CUP 15,33,91,187 8 Expenses towards overseas market development CUP 12,03,750 9 Interest paid for the usance period availed CUP 80,02,500 10 Reimbursement of expenses - 14,80,95,057 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rables, more particularly Colour Televisions. Therefore, LGEIL expected that during Cricket World Cup 2003, the sales of LG products would grow due to greater visibility achieved by sponsoring the Cricket World Cup 2003. b) Brand Awareness growth :- LGEIL anticipated that the media coverage of the event would lead to greater brand awareness in India (expected to grow from 17.50% to 35.00%. c) Viewership :- There are 14 nations playing in 2003 World Cup of which three nations are new. The population table of these Countries is as given below:- S. No. Country Population (in crores) % 1 India 103.41 65% 2 Australia 1.97 3 New Zealand 0.39 4 England 6.00 5 South Africa 4.27 6 Srilanka 1.97 7 Bangladesh 13.56 8 Pakistan 14.76 35% 9 Kenya 3.16 10 Zimbabwe 1.25 11 Canada 3.22 12 West Indies 2.97 13 Namibia 0.19 14 Holland 1.61 Total 158.73 100% World Population 636.36 Based on LGEIL's assessment, the level of enthusiasm regarding the game is definitely much higher in the South Asian sub-continent than in most other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... media appliances and other consumer durables are considered as luxurious items in this part of the world whereas in developed nations these items have greater penetration. It is also demonstrated from the fact that consumer companies keep on adding new models and versions of products in more advanced countries to begin with having better per capita income and then these versions are brought to Asian Continent market. Therefore, while arriving at a conclusion that impact of level of enthusiasm only will bear fruits for appellant is not a correct assumption. 3.8 The TPO further commented that that cricketing events involving Indian team would benefit LGEIL also but if there is an additional sale of Rs. 100 of LG product in India it will add a profit of Rs. 5.85 to LGEIL (since as per transfer pricing documentation submitted by the appellant operating margin of LGEIL over sale is 5.85%.) However at the same time it will mean additional profit of Rs. 3 for LGEK on account of Royalty payment @ 3% on domestic sale and also a profit on account of technical know how, design fee and profit element in sale of raw material or finished goods which LGEIL has to buy from parent company for eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which is evident from Wimbledon matches and Australian open matches. Therefore, a lower proportion of population in these countries would be interested in watching cricket vis-a¬vis India. Hence, LGEIL would have benefitted significantly out of the sponsorship ..... " "....Vide its submission dated 11th December' 2008, the appellant further submitted extracts of an article which highlights the importance of cricket advertising in India, "Global Cricket Corporation (GCC), the Newscorp company, is said to have paid $550 million to buy the rights for two World Cup tournaments and then sold them to Sony TV. About 70 per cent of the advertising revenue is expected to come from India." [Source http:/www.domain-b.com/industry/entertainment/20021221 cricket. html The appellant therefore submitted that since 70% of advertisement revenue was expected to be from India, it cannot be reasonably constructed that purchase power of South Asian subcontinent is low ..... " LGEIL had derived contribution rived significant benefit from contribution to GCC Vide submission dated 23rd April' 2009, the appellant substantiated the above stated fact by highlighting that the comparables have regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian entity, is incurring much higher expenses as is being jointly incurred by LGEK and LGEIL. Hence, Hero Honda must have anticipated much higher benefit than its 'expenditure out of advertising for the world cup. Since the appellant has contributed a mere 40% of such an expense, it cannot be regarded as excessive in the case. Allocation key adopted by the TPO is incorrect The allocation of cost on the basis of allocation key (percentage of profit/ sales between LGEK and LGEIL and its AEs) used by the TPO is not correct since:- It doesn't adhere to the mechanism of cost allocation as prescribed by the OECD guidelines. In this regard, the appellant has contended that OECD states that each participant's interest in the results of the Cost Contribution Arrangement(CCA) activity should be established from the outset. OECD also states that the goal is to estimate the shares of benefits expected to be obtained by each participant and to allocate contributions in same proportions. Hence, sales/ gross margin, which is a post event measure and which does not co-incide with the 'expected' benefit is not the right allocation key because: a) It is a post match event which could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Total sales of LGEIL (in Rs.) INR 30,317,261,932 Proportionate sales of LGEIL 41.33% It is evident from above that out of the total sales of these cricket playing nations, the sales of. LGEIL constitutes 41.33%. Hence, the 40% share of the total global sponsorship expense as borne by the Appellant should be considered to be at arm's length. Further, chances of incremental sales are very dim in Western Countries. For example, in United Kingdom for every 100 households the number of Color Televisions is 98.6 as compared to India where for every 100 households only 31.1 Color Televisions are available. Thus appellant contended that this leaves, no alternative, but the population as the only logical base to share cost in the case cost sharing agreement. Thus, the ratio of contribution, which is based on "percentage of profit" is skewed and is contrary to the reality existing with regard to the love of cricket in India. Whereas most countries to which LGEK is selling its goods, including the major ones such as South Korea, China etc are indifferent to cricket. LGEK should not compensate LGEIL as it derives only indirect benefits of the advertising spend and comparable vendors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the above mentioned facts, it may be unreasonable to conclude that indirect benefits accrue to AEs as in an uncontrolled scenario as well, no vendor remunerates an entity for its advertisement efforts. Hence, an adjustment on the basis of such long stretched indirect benefits to AEs cannot be sustained. Benefits of LGEK's advertisement expenses accrue to LGEIL as well. The appellant in its submission has submitted that LGEK for AY 2003-04, has incurred in Indian Rupees an expenses of approx Rs. 3441 crores on all kinds of sponsorship including motor sports, soccer, golf and other sports and similar events, and that expense should also be considered for allocation rather than global sponsorship of ICC World Cup Cricket tournament only since over 77% of its global falls are in non cricket playing countries and such sports, which are more popular in countries outside the Indian sub-continent, would have played a bigger role in contributing to the revenues of LGEK (LG Group) than the cricket world cup. It is further submitted that LGEIL makes no contribution for the expenses incurred in sponsoring such sports played outside India, which enjoy significant viewership in India as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld've charged higher for products sold to B and consequentially, the profit earned by B would have been lower than comparables who undertake their own marketing. Since in the example, the profits earned by B were same as that of comparable companies, it was concluded that benefits obtained by B result in profits similar to those made by independent marketers and distributors from similar marketing arid distribution agreements. Hence, the arrangement was held to be at arm's length. On analysing the above mentioned facts, it can be seen that in the Appellant'-s case, the Appellant is responsible for its own marketing efforts and any benefits/losses out of such marketing activities accrue to the Appellant. Hence, the Appellant is compensated for its marketing efforts by way of sales. The same is evident from the fact that the company earns profits at the same level as the comparable companies. To conclude, the Appellant's case is identical to the example cited by the ATO, wherein the ATO has held such an arrangement to be at arm's length." 5. Considering the aforesaid, Ld. Commissioner of Income Tax (A) referred to the following break-up of Global sales of LG Group:- Region Exter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LG Korea and other group companies in sponsoring and advertising in other sports events viz. motor sports, soccer, gold which are popular and played outside India but they enjoy significant viewership in India as well. 9. Ld. Commissioner of Income Tax (A) referred to the TPO's contention that it is the buying capacity (purchase power) of the customers which drives his first decision to buy or not to buy a consumer product and that purchasing power of South Asian Subcontinent is comparatively very poor as compared to Western Continents. However, Ld. Commissioner of Income Tax (A) noted that in this regard it was important to consider the penetration level of sales in advanced countries for example in UK for every 100 household the number of Color Television is 98.6 as compared to India where for every 100 households only 31.1 Color Television are available. Hence, Ld. Commissioner of Income Tax (A) inferred that the benefits in terms of increase in sales would be much higher in case of LGEIL as compared to the advanced countries where standard of living is high. In this regard, Ld. Commissioner of Income Tax (A) noted that as per the data submitted by the assessee's sales increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.49%. That this clearly implies that the assessee derived significant benefit due to its advertisement expenses during the World Cup. S.No. Company Sales (for a period of 12 months) % increase in sales F.Y. 2001-02 F.Y. 2002-03 1 Videocon appliances Ltd. 9,35,47,67,773 9,54,80,65,335 2.07% 2 Videocon Communications Ltd. 5,38,40,05,415 6,43,37,53,460 19.50% 3 Video International Ltd. 31,02,82,43,093 33,60,03,62,011 8.29% 4 BS Refrigerators 78,68,55,420 60,43,09,913 -23.20% 5 Symphony Comfort Systems Ltd. 28,17,62,969 20,42,91,997 -27.50% 6 Hitachi Home and Life Solutions (India) Ltd. 1,98,24,54,000 1,75,02,84,667 -11.71% 7 Godrej Appliances Ltd. 4,58,01,67,000 6,63,87,000 -98.55% 8 Carrier Aircon Ltd. 3,18,42,85,000 3,30,11,78,667 3.67% 9 Whirlpool of India Ltd. 9,86,74,97,000 8,76,76,83,200 -11.15% Average increase in sales of the comparables. -15.40% Tested Party LG Electronics India 20,03,99,94,000 27,06,16,51,552 35.04% From the above discussion, Ld. Commissioner of Income Tax (A) concluded LGEIL derives commensurate benefit for the GCC contribution and the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. Every International Cricket tournament where India is participating gives a boost to the Sales of all Consumer durables, more particularly Colour Televisions. Therefore, assessee expected that during Cricket World Cup 2003, the sales of LG products would grow due to greater visibility achieved by sponsoring tournament. The assessee further anticipated that media coverage of the event would lead to greater brand awareness in India. This was expected to grow from 17.50% to 35.00%. Assessee further considered the population of these countries where Cricket is played. Out of the total population in these 14 nations 60% population is in India. Hence, it was assessed that level of enthusiasm regarding the game was much higher in the South Asian sub-continent. It was further considered that larger market for televisions and other appliance and media devises was in India, amongst all cricket playing and watching countries. Hence, the percentage of the population watching cricket is much higher than the other thirteen countries. In these circumstances, it was decided that assessee contribute 40% towards the total sponsorship. 19. However, TPO did not agree with the above cost contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also refer to the following sales data:- Name of Country 2002 Australia $ 307,661,748 England $ 451,684,982 South Africa $130,097,693 Canada Not available New Zealand No subsidiary in this country In F.Y. 2002-03 Srilanka -do- Banladesh -do- Pakistan -do- Kenya -do- Zimbabwe -do- West Indies -do- Namibia -do- Holland -do- Total Sales in Major Cricket Playing Nations Other than India (in $) $ 889,444,423 Exchange rate 48.40 Total sales in Major Cricket Playing Nations Other than India (In Rs.) INR 43,044,662,852 Total sales of LGEIL (in Rs.) INR 30,317,261,932 Proportionate sales of LGEIL 41.33% 21. From the above, we find that sale of LGEIL constitute 41.33% of total sales. LGEK and its subsidiaries incur all kinds of sponsorship expense. The expenses of such sponsorship also contribute significantly to the sales by these entities. Hence, we agree with the Ld. Commissioner of Income Tax (A) that considering the sale data of 14 of the Cricket Playing nations LGEIL contribution is reasonable. Further, LGEIL has not made any contribution towards the expenses of approximately Rs. 3441 crores incurred by LG Korea and other group companies in spon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ej Appliances Ltd. 4,58,01,67,000 6,63,87,000 -98.55% 8 Carrier Aircon Ltd. 3,18,42,85,000 3,30,11,78,667 3.67% 9 Whirlpool of India Ltd. 9,86,74,97,000 8,76,76,83,200 -11.15% Average increase in sales of the comparables. -15.40% Tested Party LG Electronics India 20,03,99,94,000 27,06,16,51,552 35.04% From the above table, it is seen that assessee's sales had increased by 35.04% during the financial year 2002-03 pursuant to the sponsorship of cricket event whereas the sales of comparables companies got reduced by 15.49%. The above indicates that assessee derived significant benefit due to its advertisement expenses. 26. We further refer to the TPO's contention that the benefit of LGEIL sales would accrue to the associated enterprises since they are earning from LGEIL by way of imports, royalty etc. Hence, they should also contribute to LGEIL's ad spend. In this regard, Ld. Commissioner of Income Tax (A) has referred to the financial information obtained from the assessee which showed that only 31.16% was procured from its associated enterprises and the balance was purchased from local Indian Vendors. Hence, Ld. Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicit the advertisements for Star TV channel. No person would give advertisement unless he is sure of large viewership of programmes on Star TV Therefore, if assessee incurs expenditure on advertisement with a view to increase the viewership of Star TV, in our opinion, such expenditure would be in the interest of assessee's business though it may also benefit its principal ... " 30. Hence, we find that the above also justifies the portion of cost contribution allocated to the assessee. 31. In the background of the aforesaid discussion, we are in agreement with the Ld. Commissioner of Income Tax (A) that the TPO's action of apportionment of GCC contribution in the ratio of 5.40 : 94.60 between LGEIL and LGEK is not correct. We affirm the Ld. Commissioner of Income Tax (A)'s view that LGEIL has received commensurate befits of its 40% share contribution. Hence, we hold that the adjustments made by the Assessing Officer /TPO on this account has rightly been deleted by the Ld. Commissioner of Income Tax (A). 32. Apropos ground no. 2 :- Provision for warranty expenses. On this issue Assessing Officer observed that the assessee has made a provision of Rs. 6,57,19,516/- for service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the change in the accountancy was motivated or was improper or that the provision made in the accounting year and deduction claimed as business expenditure was unduly excessive and was intended to evade taxation. Following the ratio laid down by the jurisdictional Delhi High Court the claim of the assessee company has been examined. It has been noticed that the assessee company had made the warranty provisions right from the first year of the commencement of the business i.e assessment year 1998-99. These provisions were made after working out the factor based on the actual expenses divided by the average sales of the earlier years. The factor value so worked out was applied as a multiplying factor on the sale of the year resulting into expenses including provisions. The difference in the expenses including provisions and actual expenses was considered for providing the additional provisions. This method was followed by the assessee company uniformly right from the first year of the commencement of the production. Although the claim of the provisions as a revenue expense was made first time in the year under consideration based on the decision of Hon'ble Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidy, in accordance with the UP State Industrial Policy, is revenue in nature. 2.1 That on facts and in law the Ld. Commissioner of Income Tax (A) erred by failing to appreciate that the sales tax subsidy is in the nature of capital subsidy granted by the UP State Government for promoting capital investment in specified areas. 2.2 That on the facts and in law the Ld. Commissioner of Income Tax (A) erred in coming to the conclusion that the appellant had not set up the industry in view of the incentives given by UP Industrial Policy. He should have rather evaluated the object of the government behind granting the subsidy. 2.3 That on facts in law Ld. Commissioner of Income Tax (A) erred in relying on the fact that industrial policy was not formulated with the sole objective of encouraging the capital investment in NOIDA area, but various other objectives as well. He should have instead evaluated the purpose and the object of the subsidy or exemption scheme to determine the nature of the receipt in accordance with the principles laid down by Supreme Court in the case of Sahney Steel (228 ITR 253). 2.4 That on facts and in law Ld. Commissioner of Income Tax (A) erred in coming to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. We have heard the rival contentions in light of the material produced and precedents relied upon. We find that the issue is squarely covered in favour of the Revenue by the decision of the ITAT in assessee's own case for the assessment year 2002-03. In this case the ITAT has held as under:- "9. We have heard both the parties and gone through the material available on record. In this case the assessee had collected sales tax as a part of dealers' price. At the year end the sales tax portion, which formed the part of dealers' price had been bifurcated and has been claimed as capital subsidy. We have also gone through the Notification No. 1179 dated 31.03.1995 issued by the State Government of Uttar Pradesh. The State Govt. has provided sales tax exemption with an objective to promote the development of certain industries which have been set up or undertaken modernisation, diversification, backward integration by way of fixed capital investment of Rs.50 crores or more. The exemption of from sales tax or benefit of reduced rate of tax is available to those units which have started production or have carried out expansion or modernisation or backward integration etc. between 1.12.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for 10 years. 10. Neither the certificates issued by Greater Noida Industrial Development Authority nor the Notification issued by the State Govt. authorises the assessee to collect sales tax from its customers. The assessee has been exempted from collecting the sales tax from customers on the sales made with effect from 27th March, 1998. In fact, the ld. counsel for the assessee made a statement at the bar, during the course of hearing, that neither the Notification has authorized the assessee to collect sales tax nor the assessee had collected the sales tax as such. The assessee had included the element of sales tax in the dealers' price as a sale price of the product. In the States other than Uttar Pradesh, the sales tax so collected as a part of dealers' price has been paid to respective State Governments, whereas in the case of the assessee, since the assessee was not liable to pay sales tax, as exemption has been provided to the extent of 200 per cent of fixed capital investment, the sales tax element which is embedded in the sale price have been retained by the assessee as excess sales consideration. At the year-end the assessee has allocated the sales tax element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt and had to be included in its total income; (iii) that if and when the appellant paid the amount collected to the State Government or refunded any part thereof to the purchaser, the appellant would be entitled to claim deduction of the sum so paid or refunded." From the Notification issued by State Government, as discussed above, it is clear that exemption from Sales tax / trade tax or reduction in sales tax / trade tax has been provided to the industrial units, which have been set up or carried out expansion, modernisation or backward integration. The sales tax exemption is available from the date of first sale of eligible units. In the case of the assessee the production of expended unit started from 9th March, 1998 and the first sale was effected on 27th March, 1998. The assessee had made application for the purpose of exemption on 19/09/1998. It is a undisputed fact that none of the clause of the Notification issued under section 4-A of Trade Tax Act, 1948 had authorised the assessee to collect sales tax / trade tax. It is also a fact that the collection of sales tax / trade tax has been made after the eligible industrial unit started production. Nowhere in the Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govt. of Uttar Pradesh, read with the provisions of section 28 of the Income-tax Act, the Tribunal was legally correct in holding that the sum of Rs.20,11,000/- receivable from the State Govt. was taxable as revenue receipt? " Hon'ble Allahabad High Court held as under:- "15. So far as the question referred at the instance of the assessee is concerned, we find that under the Govt. order dated 24/08/1984 issued by the State Govt. providing aid was to be given to the extent of the purchase tax paid by the sugar mill on purchase of sugar cane in order to facilitate payment of cane price. It may be mentioned here that the cane price paid by the assessee is a revenue expenditure and, therefore, any amount provided as aid for making revenue expenditure, would partake the nature of revenue receipt." 12.3 Similar view has been taken by Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Abhishek Industries Ltd. (supra). The facts of this case were that the assessee initially while filing the return of income treated the sales tax subsidy as a revenue receipt. Even though a revised return was filed by the assessee on 12/08/1994, still no claim was made for treating the sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee for setting up of the industry. The endeavour of the State was to provide the newly set up industries, a helping hand for specified period to enable them to be viable and competitive vis-a-vis the industries were already set up and were in production since long. The assessee has failed to establish on record that the kind of subsidy involved in the present case was in the form of a subsidy to enable it to carry out capital investment. In the absence thereof, it cannot possibly be presumed by the authorities that such a subsidy would be in the nature of capital subsidy. The onus to provide the same strongly lay on the assessee, which it had failed to discharge. " 12.5 Likewise in the case of Mudit Refrigeration P. Ltd. Vs. ACIT (2003) 84 I.T.D. 289 (All.) according to scheme notified by State Govt. the assessee company, a cinema owner was entitled to grants-in-aid or subsidy by way of adjustment of Entertainment Tax, which was treated as paid by way of adjustment and retained by the assessee. The assessee claimed it as a capital receipt, on plea that subsidy was paid to carry on trade and that its quantification on the basis of entertainment tax was only a measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting unit was located. The salient features of the scheme formulated by the Andhra Pradesh Govt. were that the incentives were not available unless and until the production had commenced; the availability of incentive would be limited to a period of five years from the date of commencement of production; the incentives were to be given by way of refund of sales tax and also by way of subsidy on power consumed for production to the extent stated in the notification; the exemptions were given from payment of water drawn from Govt. sources. The assessee- company, S, set up a factory at P which went into production in the year 1973. The assessee maintained its accounts according to the calendar year. It was, therefore, entitled to the benefits of the said Government order in the calendar year 1973, which meant the assessment year 1974-75. In the said accounting year, the assessee obtained refund totalling Rs.14,665.70 being refund of sales tax on purchase of machines, purchase of raw materials and sale of finished goods. The Income-tax Officer, while making the assessment for the year 1974-75, included the said amount in the assessable income of the assessee which was confirmed on appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax collected for any particular purpose. The notification as stated above has neither authorised the assessee to collect the sales tax nor has the assessee collected sales tax as such. The sales tax element is embedded in dealer's price and has been collected as part of dealer's price. Even if it is assumed that the assessee was authorised to collect sales tax and retain with it, the same will be chargeable to tax as trading receipt in view of decision of Hon'ble Supreme Court in the case of Sahney Steel and Press Works (supra). 14. The contention of the assessee that the issue is covered in favour of the assessee by the decision of Special Bench of the Tribunal in the case of Reliance Industries (supra), in our view, is not correct in view of the decision of Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries P. Ltd. (supra); the decision of jurisdictional High Court in the case of CIT Vs. K. M. Sugar Mills Ltd. (supra) and the decision of Sahney Steel and Press Works (supra). Moreover, the decision of Special Bench of the Tribunal was rendered before the decision in the case of Abhishek Industries P. Ltd. (supra). The assessee had not been able to produce an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for the purpose of calculating the deduction u/s. 80HHC. 45. Assessee appealed before the Ld. Commissioner of Income Tax (A) that the said action of the Assessing Officer was not justified as assessee was maintaining the separate sets of books of accounts for each of the Division. Assessee further placed reliance upon the several case laws. Considering the above, Ld. Commissioner of Income Tax (A) has held as under:- "I have gone through the above submissions of the appellant. On this issue though the appellant claims that the IPCA's judgement is not applicable, but this fact is totally wrong. The issue before the Hon'ble Supreme Court in IPCA's case was "whether the appellant are entitled to deduction of 80HHC ignoring the loss" and Hon'ble Supreme Court, held in clear term that while calculating the deduction under section 80HHC, the provision of Section 80B(5) and Section 80AB cannot be overlooked and the income has to be computed in accordance with the provisions of this Act, then not only profits but losses have to be taken into consideration. Thus the legal proposition is very clear that Section 80HHC is governed by Section 80AB and Section 80AB has been gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the decision of the Hon'ble Apex Court in the case of Bajaj Tempo Ltd. vs. C.I.T. 196 ITR 188 for the proposition that deduction provisions should be liberally construed. 48. Ld. Departmental Representative on the other hand relied upon the order of the authorities below. 49. We have carefully considered the submissions and perused the records. We find that the Ld. Commissioner of Income Tax (A)'s reliance on the decision of the Hon'ble Apex Court is not applicable on the facts of the present case. Further, as discussed above, there are decisions in favour of the assessee as well as against the assessee on this issue. In this view of the matter we rely upon the decision of the Hon'ble Apex Court in the case of Vegetable Products (Supra), that if two views are possible, one in favour of the assessee and one against the assessee, the view in favour of the assessee should be adopted. Hence, respectfully following the decision from the case laws of Madras Motors (Supra) and Rathore Brothers (Supra), this issue is decided in favour of the assessee. Accordingly, we set aside the order of the authorities below and hold that Assessing Officer was not correct in including the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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